European Outlook: The positive mood on stock markets continued in Asia overnight as investors focused on the dovish side of Yellen’s testimony yesterday, which already saw U.S. and European markets closing with gains yesterday. In Japan though TSE and Nikkei erased early gains as banks and insurers weighed. Still, U.S. and European stock futures are also moving higher, even if the BoC’s rate hike yesterday was a reminder that global central banks are eying exit steps, which means dovish central bank comments can temporarily halt, but are unlikely to stop the gradual rise in yields going ahead.

Fed Chair Yellen: reiterated the economy grew at a moderate pace, in her prepared remarks, while the labor market continued to strengthen. She also said she and the committee expect that the “evolution of the economy will warrant gradual increases in the federal funds rate.” She also repeated policy is not on a preset course. There was also a repeat of the paragraph on uncertainties in the outlook, and she noted inflation, possible changes in fiscal and other government policies, and regarding the global economy. Bonds and stocks have rallied on these comments, and the dollar has gyrated, even though the gist of her remarks were already released in the Monetary Policy Report last Friday. Yellen on the whites of inflation’s eyes: she side-stepped a question on the exact timing of balance normalization, and whether the soft inflation path could impact the FOMC’s decisions. She added that the Fed has laid out plans to normalize balance sheet in a transparent way and reiterated it’s likely to begin this year and “relatively soon,” echoing the remarks from the policy statement. The Fed overlooked the weaker inflation and real sector data back in June when it hiked rates, suggested another is likely this year, and outlined balance sheet normalization details, and that view still seems to hold currently. Also, Yellen indicated the Fed has tried to outline the balance sheet runoff, and indeed, that was an addendum to last month’s FOMC policy statement. She expects the unwind process to go smoothly as the Fed has been methodical in informing the public.

Bank of Canada: raised rates 25 bps to 0.75%, matching widespread expectations. Recent data have boosted the Bank’s confidence in its outlook for above potential growth and the absorption of excess capacity in the economy. They acknowledge the recent softness in inflation but judge it to be temporary. Given the lag between policy action and future inflation, they decided it was appropriate to raise rates. As for future moves, they will be “guided by incoming data as they inform the Bank’s inflation outlook.”. Hence a follow up hike in September is likely if the economic data remains encouraging and maintains the broadening among regions and sectors seen this year. An October hike (with no change in September) would send a more gradualist message, but given their U-turn in tone and rate hike yesterday, taking it slow is perhaps not a priority. BoC Poloz said that he does not “doubt that rates will move higher” in the full course of time. There is not a pre-determined path, with policy moves data dependent, he said. He responded to a question on if today’s hike was to remove the 50 bp in 2015 cuts or the start of a series of steps upward. Not surprisingly, he did not classify yesterday’s move as either of the two scenarios. The economy, he said, can handle well the move today. Another two hikes in 2018, in January and April.

German Jun HICP was confirmed at 1.5% y/y national CPI at 1.6% y/y. No surprises there, and although the slight uptick in the headline rate over the month was against the general trend in the Eurozone, even the German HICP is clearly below the ECB’s definition of price stability. Lower oil prices are playing a key factor as annual energy price inflation has now turned negative and stood at -0.1% y/y in June, down from 0.8% y/y in May and compared to 2.8% y/y at the start of the year. Prices for light heating oil rose merely 0.9% y/Y in June, after still rising 11.7% y/y in May and a staggering 42.5% y/y in January. So base effects from energy prices are now holding back the headline rate, and indeed the ECB already cut back its inflation projection on the back of lower than anticipated oil prices. More arguments then for the doves at the council, who are eager to reassure markets that nothing has changed so far, although that QE tapering will start early next year is almost certain.

Main Macro Events Today

US PPI – June PPI data is out today and should post a -0.2% headline decline with a 0.2% core increase. This follows May figures which had a flat headline and a 0.3% core index. There is some downside risk to the headline as WTI oil prices dipped 7.0% on the month.

US Jobless Claims – Initial claims data for the week of July 8 are out today and are expected to post a decline to 245k from 248k last week and 244k the week prior.

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European Outlook: Asian stock markets moved cautiously higher overnight and are heading for a strong week, for Hong Kong the best of the year, helped by a rally in banks and underpinned by cautious comments from Yellen, who doesn’t seem to be in a rush to tighten policy. Central banks remain the key focus and the announcement that Draghi will be speaking at Jackson Hole shortly before the September policy meeting has sparked speculation that he will use the chance to lay out the ECB’s tapering plans, coupled with remarks from BoE’s MacCafferty that the BoE should revisit the guidance on the unwinding of QE sent European yields higher yesterday afternoon, while capping gains in Eurozone equities and seeing the FTSE 100 closing in the red. Stock futures are pointing to a rebound in the FTSE 100, and Yellen’s comments may help bond yields to come off highs at the end of the week. The European calendar has Eurozone trade data as well as final Italian HICP readings.

Fed Chair Yellen: has concluded her testimony yesterday. There wasn’t an attempt to walk back from the cautiously optimistic tone from yesterday’s testimony where she hedged the softer inflation dynamics. Other than her comment that the balance sheet is unwound is likely to push up rates at the long end, there weren’t any big revelations yesterday. That indication has seen the 30-year yield jump 5 bps to 2.925%, with the 5s-30s spread has steepened to 101.6 bps from 100.9 bps yesterday. It was as narrow as 93.5 bps on July 3. She said Q2 GDP growth should be “significantly stronger” versus Q1, but reaching a 3% pace would be “quite challenging.” Yellen on the balance sheet said that their intention is to shrink the balance sheet in a “slow, gradual, and predictable way. Fed has set out a detailed plan on how it will achieve that. Once triggered, the unwind is expected to run in the background. The run off should result in some increase in long term rates compared to the front end, she acknowledged, and the FOMC will take that into account as it sets the funds rate. She expects the funds rate to remain the principal tool of monetary policy. She repeated that the balance sheet and the quantity of reserves will be reduced over the next several years, but won’t go back to the pre-crisis levels.

U.S. reports: revealed a smaller than expected PPI downdraft into mid-year despite falling oil prices, with a lift from rising food prices thanks to hot and dry weather in the upper midwest. We also saw sustained lofty initial claims levels into the holiday week of July that defied the usual auto retooling headline, likely thanks to ongoing vehicle sector weakness and some extended summer plant shutdowns. For PPI, the 0.1% June headline and core price gain beat estimates thanks to a smaller than expected 0.5% energy price drop alongside a 0.6% food price rise. For claims, a 3k downtick to a still-elevated 247k trimmed a 6k rise to 250k (was 248k) in the prior week. Claims are averaging 247k in July, following lean prior averages of 243k in June, 241k in May, and 243k in April. Next week’s BLS survey week reading should lie within the mix of 242k in June, 233k in May, and 243k in April, though the recent up-tilt may imply an overshoot.

Main Macro Events Today

EU Trade Balance – May Trade Balance for expected to post an increase at 20.3B from 19.6 B last month.

US Retail Sales – The June retail sales report expected to be a flat with the ex-autos figure up 0.2% This follows respective May figures of -0.3% for both the headline and ex-autos and 0.4% for both figures in April. There is possible downside risk from the recent declines in auto sales as well as declines in gasoline prices. Meanwhile. June CPI should post a flat headline as well with a 0.2% increase for the core. This compares to the May figures which had the headline down 0.1% and the core up 0.1% and April where the headline was 0.2% and the core 0.1%. An anticipated dip in gasoline prices could weigh on the release too.

US CPI and Industrial Production – June industrial production data is out today and should post a 0.3% increase for the headline following a flat rate in May and a 1.1% bounce in April. Capacity utilization should tick up to 76.8% from 76.6% in May and 76.7% in April. Mining and factory employment both climbed in the June which could provide a tailwind to the release.

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Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

The conundrum of improved growth and slowing inflation continues to bedevil central bankers as the opposing dynamics lead to conflicting policy prescriptions on normalization. But there’s a new wrinkle as QT, quantitative tightening, comes into view, alongside the more traditional tool of rate management, each of which have differing implications for bond markets. And the differing views of hawks and doves have resulted in a clash of commentary that’s done more to confuse and vex the markets regarding the course of policy, rather than provide stability through transparency. The markets will remain hypersensitive to policy actions and policy-speak near term, while keeping a close eye on inflation and growth data.

United States: U.S. markets will continue to assess Fed Chair Yellen’s testimony last week, where she remained optimistic on growth, but hedged on “transitory” inflation outlook. Headlining the data slate will be June housing starts, July PMIs and trade prices, none of which will be crucial for trading. Housing starts (Wednesday) are forecast rising to a 1,190k pace in June following the 5.5% drop to 1,092k in May. However, a rise in construction jobs last month suggests upside risk. The July Empire State index (Monday) is seen falling back to 15.0 after jumping 20.8 points to 19.8 in June (which was the highest since September 2014). Also, the July Philly Fed index (Thursday) should dip to 24.0 following the 11.2 slide to 27.6 in June. The 43.3 print from February was the highest going back to January 1984. The June trade price data (Tuesday) will be of interest. Import prices are forecast falling 0.5% after dipping 0.3% in May, with petroleum the main factor behind the weakness. Export prices should edge up 0.1% following a 0.7% drop in May where declines in food and ag prices weighed. Other releases on this week’s calendar are the NAHB homebuilder survey for July (Tuesday), May Treasury capital flows (Tuesday), and weekly initial jobless claims (Thursday).

Canada: Canada’s calendar has a healthy helping of economic data this week, but nothing from the Bank of Canada. However, the economic data could influence expectations for the September announcement. The June existing home sales report is expected to be released on Monday, with a 5.0% y/y drop projected for total sales. Manufacturing (Wednesday) is seen rising 1.0% m/m in May after the 1.1% improvement in April. Retail sales (Friday) are projected to grow 0.3% m/m in May after the 0.8% gain in April. CPI is expected to dip 0.1% in June (m/m, nsa) after the 0.1% rise in May, leaving a slowing in the annual growth rate to 1.0% in June from the 1.3% y/y pace in May. But the June CPI is of little importance to the near-term policy outlook, given that the BoC is looking through the temporary factors (decline in auto prices and electricity costs) that are holding back total and core inflation growth. CPI will become more important later this year, when the temporary nature of the presumed factors restraining inflation will be tested.

Europe: All eyes will be on the ECB this week as traders look to the central bank for direction. Conflicting messages from ECB officials exacerbated volatility in recent weeks, and nerves are likely to remain high. The ECB is widely expected to be heading for tapering early next year, although Praet and Draghi are wary of committing prematurely to exit steps and have been instrumental in keeping the QE easing bias in place. Data releases this week are unlikely to add further ammunition to the arguments of the hawks at the council. The final reading of Eurozone June HICP inflation (Monday) is widely expected to be confirmed at just 1.3% y/y from 1.4% y/y in May, and clearly below the ECB’s 2% limit for price stability. However, base effects from energy prices are actually largely to blame for the slowing versus May, and core inflation ticked higher in the June preliminary to 1.2% y/y from 1.0%, as did the German headline rate. Still, with German PPI inflation seen slowing in May, the doves around Praet and Draghi will continue to argue that the low inflation environment still warrants a substantial degree of monetary stimulus. The ECB has acknowledged though, that growth is strengthening and that adverse deflation scenarios are no longer looking likely. That prompted the move to a neutral stance on rates in June. And, the expected further improvement in Eurozone consumer confidence (Thursday) to -1.1 from -1.3 should back expectations for ongoing robust growth going ahead. German ZEW investor confidence (Tuesday) meanwhile is likely to reflect market concerns about the impact of tapering as global central banks eye exit steps. The Eurozone also has current account data for May (Thursday), and there’s a German 30-year Bund sale (Wednesday). The ECB releases its bank lending survey (Tuesday).

UK: This week’s schedule brings the June inflation report (Tuesday), where expected headline CPI to remain at 2.9% y/y, a four-year high. The sharp y/y weakening in sterling following the Brexit vote in June last year has kindled inflation, and at least three of the current eight-member MPC committee (normally nine, with one position currently vacant) are now itching to reverse last August’s 25 bp cut in the repo rate. Official retail sales for June (Thursday) has us expecting a 0.2% m/m rebound after the sharp 1.2% contracting on May.

Japan: Japan is closed on Monday for Marine Day holiday. The BoJ meeting (Wednesday, Thursday) will be a focal point given the world-wide interest in all things central banking. No changes in policy are expected in either rates or stimulus. The Bank may, however, downgrade its inflation outlook, while upping expectations for the economy, consistent with recent global patters and according to recent market chatter. Data includes the June trade report which expected the balance to flip to a JPY 500.0 bln surplus, from the JPY 204.2 bln shortfall in May. The softer yen likely supported a bounce in exports after three months of weakness. The May all-industry index (Thursday) should fall 1.0% m/m based on declines in retail sales and industrial production, after the prior 2.1% increase.

Australia: The June employment report (Thursday) is the highlight this week. A 20.0k gain is projected following the 42.0k improvement in May. The unemployment rate is seen rising to 5.6% from 5.5%. The Reserve Bank of Australia (Tuesday) releases the minutes to the July 4 meeting where the cash rate was left steady at 1.50% and Governor Lowe’s statement was consistent with an unchanged stance over the rest of the year as the August 2016 easing continues to roll through the economy.

New Zealand: New Zealand’s calendar has Q2 CPI (Tuesday), expected to rise 0.1% (q/q, sa) after the 1.0% gain in Q1. The Reserve Bank of New Zealand’s next meeting is on August 10.

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European Outlook: Asian stock markets headed south even as rate hike expectations are being pushed out, as investors turn their focus on U.S. politics and rising doubts over Trump’s reform agenda. In China markets continued to fret about the prospect of tighter regulations and Sunac China Holdings Ltd came under pressure in Hong Kong amid media reports that banks are looking into the company’s credit risk. A stronger Yen meanwhile weighed on exporters as markets re-opened after a long weekend, although it was the AUD that outperformed. U.K. and U.S. stock futures are also down, while oil prices are holding marginally above USD 46 per barrel. Today’s calendar has German ZEW investor sentiment as well as the ECB’s bank lending survey, while the U.K. has inflation numbers for June. The ECB meeting on Thursday continues to hang over Eurozone markets, with investors concerned that Draghi may already drop the easing bias on QE.

U.S. reports: U.S. Empire State manufacturing index dropped 10.0 points to 9.8 in July, lower than expected, after rebounding 20.8 points to 19.8 in June. The latter was the highest since September 2014. Declines were broad-based. The employment component fell for a third consecutive month, sliding to 3.9 from 7.7, with the workweek at unchanged from 8.5. New orders fell to 13.3 from 18.1. But, prices paid edged up to 21.3 from 20.0, with prices received at 11.0 from 10.8. The 6-month general business outlook index eased to 34.9 from 41.7, with employment at 11.8 from 12.3. The future new order index was 33.4 from 42.2, with prices paid at 30.7 from 33.1 and prices received at 15.7 from 13.8. Capital expenditures are at 15.0 from 20.8, with technology spending at 11.8 from 11.5.

Final June EMU HICP inflation was confirmed at 1.3% y/y, in line with the preliminary number and down from 1.4% y/y in May. The breakdown confirmed that the deceleration in the headline rate was mainly due to lower energy price inflation, which dropped back to just 1.9% y/y from 4.5% y/y in the previous month. Services price inflation meanwhile accelerated to 1.6% y/y. Still, while core inflation moved up from the 0.9% y/y in May, at 1.1% y/y it remains far below the ECB’s 2% limit for price stability and prices for non-energy industrial goods rose just 0.4% y/y, so plenty there for the doves at the ECB to argue with. Against that background Draghi is likely to stick to the message from June at this week’s council meeting and try to calm tapering nerves ahead of the summer break.

Main Macro Events Today

German ZEW – ZEW investor confidence today is likely to reflect market concerns about the impact of tapering as global central banks eye exit steps. A slight decline in the headline July number to 18.3 is expected from June’s 18.6. Those are still strong level, indicating that optimists outnumber pessimists, and so should not spark fresh growth concerns, although after some disappointing U.S. data and cautious comments from Yellen, it will underpin the halt in the rise in yields.

UK PPI & CPI – The June inflation report expected with headline CPI to remain at 2.9% y/y, a four-year high. The sharp y/y weakening in sterling following the Brexit vote in June last year has kindled inflation, and at least three of the current eight-member MPC committee (normally nine, with one position currently vacant) are now itching to reverse last August’s 25 bp cut in the repo rate. The PPI for June expected to decrease at -1.0% from -1.3% last month.

BoE Gov. Carney – BoE Governor Carney will give a speech today at the unveil of the new £10 note, in Hampshire.

US Trade Data & NAHB – The June trade price data will be of interest. Import prices are forecast falling 0.5% after dipping 0.3% in May, with petroleum the main factor behind the weakness. Export prices should edge up 0.1% following a 0.7% drop in May where declines in food and ag prices weighed. Other releases for today are the NAHB homebuilder survey for July and May Treasury capital flows .

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Please note that times displayed based on local time zone and are from time of writing this report.

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European Outlook: Asian stock markets moved mostly higher, as USD steadied. The ASX is outperforming despite ongoing strength in AUD and FTSE 100 futures are rising in tandem with U.S. futures. Long yields picked up in the U.S. and Japan, but the September Bund contract moved higher in after hour trade yesterday, suggesting opening gains in Bund futures, after yesterday’s sharp drop in European yields. Oil prices are slightly down, but the front end WTI future is holding above USD 46 per barrel. Today’s European calendar is quiet, with a German 30-year auction and Eurozone construction output the only highlights, leaving the focus firmly on U.S. political events and the ECB meeting tomorrow.

ACA reform: A smattering of healthcare headlines in wake of the ACA reform abandonment and now chorus of outright repeal calls suggests the debate appears to be disintegrating further. Republican senators Collins, Portman and Capito indicated that they would vote against a repeal without a replacement plan. In contrast, Vice President Pence said he and Trump would “fully support” leader McConnell’s decision to move forward with a bill that only repeals Obamacare in a “fresh start.” Pence warned that congressional inaction “is not an option and congress needs to do their job.” Senate Democratic leader Schumer said an Obamacare repeal without replacement would be a “disaster.” Meanwhile, House Budget Chairwoman Black said she expects the Republican budget to pass the panel and full House vote. Trump’s postscript on ACA reform was aired live and he confirmed that he was “disappointed” that after hearing repeal/replace on healthcare for 7-years that the votes weren’t there. He didn’t consider the renegade votes “disloyal,” but said that more effort would need to take place to get more Republicans in seats in 2018. Trump then reiterated his fallback plan of letting Obamacare fail and predicted the Dems would come back at that point to replace it or come up with something else.

U.S. reports: import prices fell 0.2% in June, with export prices off 0.2% as well. The 0.3% decline in May import prices was revised up to -0.1%, while May export prices were nudged to -0.5% from -0.7% previously. Petroleum import prices dropped another 2.2% (a fourth straight monthly slide) versus -1.2% previously (revised from -3.9%). As for export prices, agriculture prices dropped 1.5% from -1.6%, with foods, beverages at -1.6% from -2.0%, with industrial supplies flat from -1.3%. Excluding ag, export prices were flat. Slowing inflation remains the theme into the summer months and that should support Treasury gains. U.S. NAHB homebuilder sentiment index fell 2 points to 64 in July, below expectations, after falling 3 points to 66 in June (revised from 67). It’s the lowest since 63 in October, and below the 67 6-month average, but it is well up from the 58 a year ago. The current single-family sales index dropped 2 points 70 from 72 last month. The future sales index also declined 2 points to 73 from 75. The index of prospective buyer traffic slid to 48 after dropping 2 ticks to 49 previously. The NAHB indicated tariffs on Canadian lumber are weighing.

Eurozone: UK June CPI unexpectedly softened to 2.6% y/y after May’s cycle-high rate of 2.9% y/y. The median forecast had been for an unchanged 2.9% outcome. The ebb is in sync with the directional pattern seen in inflation readings in other key economies in June, although price pressures in the UK remain relatively more elevated due to the inflationary consequences of the sharp y/y sterling decline following the Brexit vote at the end of June last year. A decline in motor fuels was a key factor driving the headline rate lower, along with the prices of recreational and cultural goods and services. German ZEW investor confidence weaker than expected, with the expectations reading falling back to 17.5 in July from 18.6 in the previous month. Expectations had been for a correction in sentiment amid the realization that global central bank support has peaked, but the dip is still more pronounced than anticipated, especially as the current conditions indicator also fell back. More arguments then for the doves at the ECB who are eager not to let markets price in tapering steps too early and we expect Draghi to try and calm nerves at this week’s council meeting, which will be the last ahead of a summer break, with the next meeting only scheduled for September.

Main Macro Events Today

US Housing Starts – Housing starts are forecast rising to a 1,160k pace in June following the 5.5% drop to 1,092k in May. However, a rise in construction jobs last month suggests upside risk.

Canada Manufacturing – Manufacturing shipments, due today, are expected to reveal a 1.0% m/m gain in May after the 1.1% rise in April. Forecast is supported by a 1.3% improvement in export values during May. However, gold shipments to the U.K. were a driver of total exports, suggesting some downside risk for our manufacturing shipments projection. An as-expected rebound in shipments would be supportive of the “improving” narrative for Canada’s economy this year, and hence underpin expectations for one more rate hike this year.

Japanese Trade – Data includes the June trade report. The balance expected to flip to a JPY 500.0 bln surplus, from the JPY 204.2 bln shortfall in May. The Exports and Imports expected to fall by 5.4% and 3.2% respectively.

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Please note that times displayed based on local time zone and are from time of writing this report.

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European Outlook: Asian stock markets moved broadly higher, led by Japan, as the BoJ kept its accommodative policy unchanged and the Yen weakened. FTSE 100 futures are also higher, while U.S. futures are narrowly mixed. The eyes are now turning to the ECB, which is expected to follow the BoJ’s lead and keep not only current policy, but the forward guidance unchanged. There is some lingering concern that the central bank could already drop the easing bias on QE at today’s meeting, so Bunds could get a boost from Draghi’s attempts to calm tapering nerves ahead of the summer break. The European data calendar has U.K. retail sales, as well as Eurozone current account and BoP data for May.

U.S. reports:. housing starts rebounded 8.3% to a 1.215 mln pace in June, better than forecast, after the 2.8% decline in May to 1.122 mln. The gain breaks a string of three straight monthly declines, and it’s only the second increase of the year. Single family starts rose 6.3% versus -2.9% previously, while multifamily starts jumped 13.3% from -2.4%. Building permits increased 7.4% to 1.254 after falling 4.9% to 1.168 mln. Regionally, starts surged in the Northeast (83.7%) and in the Midwest (22.0%), and were up in the West (1.6%), while they declined in the South (-3.8%). Housing completions improved 5.2% to 1.203 mln after increasing 4.2% to 1.144 mln.

Canada: manufacturing shipment values grew 1.1% in May, as expected, but after a sharp downward revision in April to a 0.4% gain (was +1.1%). A 4.2% gain in transport equipment sales and a 2.4% rise in chemical sales drove the increase total manufacturing shipments during May. Manufacturing sales slipped 0.1% when motor vehicles, parts and accessories are excluded. A total of 16 out of 21 industries reported an improvement in sales values. Durable goods sales grew 2.2% while non-durables dipped 0.3%. Notably, lower prices knocked petroleum and coal industry sales values 3.4% lower in May. Manufacturing sales volumes expanded 1.1% m/m in May, supportive of continued momentum in May GDP. A 0.2% m/m gain in May GDP is expected after the 0.2% rise in April. The report is supportive of the Bank’s upbeat growth outlook, in turn underpinning projections for a near term rate hike. Another 25 bp move is expected in October after no change in September.

German: PPI inflation fell back to 2.4% y/y in June, from 2.5% y/y in the previous month. A tad higher than anticipated, but still continuing the recent downtrend as oil prices turn out to be weaker than previously thought. Headline Eurozone inflation also fell back in June as energy price inflation eased, so there is no really new message from the German PPI numbers, although at 2.4% y/y, the numbers remain elevated.

Main Macro Events Today

UK Retail Sales – Official retail sales for June expected at a 0.2% m/m rebound after the sharp 1.2% contracting on May.

ECB Rate Decision, Monetary Policy statement & Conference – After the ECB removed the easing bias on rates in June, but still maintained an easing bias on QE, the central bank expected to keep policy parameters unchanged at today’s council meeting, which will be followed by a longer summer break. The message today is likely to remain that the economy may be improving but still needs a substantial degree of monetary support and cautious remarks from Draghi should underpin bonds, even if a no-change outcome is widely expected.

US Jobless Claims – U.S. initial jobless claims are expected to be 245k in the week-ended July 15. Meanwhile the July Philly Fed index should dip to 24.0 following the 11.2 slide to 27.6 in June.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets are slightly down, as banks and carmakers weighed on the index and the Yen held gains while investors look with some concern to political events in the U.S. In Europe, Draghi failed to calm tapering nerves yesterday and the EUR surged higher in the wake of the press conference, which saw Eurozone stock markets closing in the red. After the tumultuous afternoon, yesterday the GER30 seems to be heading for a quiet end to the week. The FTSE 100 outperformed yesterday and managed slight gains, amid a weak pound and could get some support today from reports that the government is accepting the need for a transitional period that will see the U.K. remaining in the single market and customs union for some time after 2019. Today’s data calendar is quiet, focusing on U.K. public finance data, although the ECB’s survey of professional forecasters could also attract some attention.

FX Update: The euro has been in consolidation mode after rallying strongly yesterday in the wake of the ECB’s policy announcement, which has left markets anticipating a tapering in QE, even it is still some way down the road. EURUSD has been settled in the mid-to-low 1.16s, below the 23-month high logged yesterday at 1.1658, although lifting somewhat in early European trade. EURJPY managed to edge out a fresh 10-day high, at 130.32. EURGBP has plied a narrow range just of yesterday’s eight-month peak 0.8977, weighed on slightly by a bid in Cable, which has lifted above 1.2980, putting in a little distance from the five-session low it saw yesterday at 1.2933. The UK’s international trade secretary, Fox, said that he is not planning on leaving the EU in 2019 without a deal, although the prime minster and other ministers had formerly used this “cliff edge” threat as an apparent bargaining tool in pre-negotiation salvos. Fox said that could be a two-year “implementation phase,” or transition period. His remarks help allay market concerns of divisions in the government’s approach to Brexit.

ECB’s President Draghi: Yesterday’s ECB meeting didn’t bring any real surprises. Rates and forward guidance were left unchanged and Draghi was eager to calm nerves ahead of the summer break as he tried to explain and clarify his comments from Sintra, which sent yields sharply higher at the end of last month. As Draghi said the last thing the ECB wants is for financing conditions to tighten prematurely and against that background, the central bank is not just keeping the easing bias on QE in place, but also remains reluctant to commit not just to actual tapering, but to the timing of the decision on the future of asset purchases. Also, yesterday Eurozone consumer confidence unexpectedly fell back to -1.7 in July from -1.3 in the previous month. Expectations had been for another improvement as labour markets continue to stabilise and inflation falls back again, but it seems lingering concern remains U.S. equities rolled over from highs coinciding with a surge in the euro through 1.16 and another whipsaw on yields. The presumption is that the ECB/euro/bund axis is still driving the volatile trade, but there was also a US AG Sessions presser expressing his wish to continue with his job at the Justice Department, along with others, despite criticism from President Trump.

U.S. reports: revealed a big Philly Fed drop to a still-solid 19.5, following a 7-month stretch of oddly robust levels, while initial claims tightened by 15k to 233k in the BLS survey week after lofty readings as we entered the July auto retooling period. We also saw a 0.6% leading indicators surge that left a 10-month string of gains. The Philly Fed drop accompanied an Empire State July decline to 9.8 from a 3-year high of 19.8 in June, while the ISM-adjusted Empire State fell to 53.3 from a 6-year high of 56.2, leaving a resumption of the drop-back in the available producer sentiment figures after an unexpected June bounce. The mix left a neutral signal for 190k July nonfarm payroll estimate, and an assumed GDP growth bounce to 2.6% in Q2 and 3.1% in Q3 after a 1.4% Q1 rate.

Main Macro Events Today

CAD CPI – The CPI, expected, to dip 0.1% in June (m/m, nsa) after the 0.1% rise in May, leaving a slowing in the annual growth rate to 1.0% in June from the 1.3% y/y pace in May. Gasoline prices pulled back in June compared to May, which drives forecasts. The three core CPI measures remained tame in May, and are expected to be subdued in June.

CAD Retail Sales – The Retail sales, expected to rise 0.3% gain in May after the 0.8% bounce in April. The ex-autos sales aggregate is seen improving 0.1% in May following the 1.5% surge in April. Gasoline prices tumbled 4.0% m/m in May after the 9.5% gain in April, according to the CPI. Hence, gasoline station sales should exert only a hefty drag on total and ex-autos retail sales. But vehicle sales were solid in May, which should support total sales.

UK Public Finance data – June’s Public borrowing data is also up today, and expected to go down to 4.80B from 5.99B last time.

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Please note that times displayed based on local time zone and are from time of writing this report.

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

Both the ECB and BoJ met expectations as each left policy unchanged last week, though the outlook for ECB remains under the dark cloud of future QE tapering, while the BoJ gave up the ghost on its inflation target near-term. The FOMC is set to follow suit and kick the policy can down the road this week, though the markets will remain highly attuned to any hints over the outlook on inflation, the economy, and the balance sheet unwinding timing/

United States: In the U.S., the FOMC is not likely to make any policy changes at the July 25-26 meeting. The slowing in inflation is likely to keep the Fed on the sidelines. Meanwhile, there has been some speculation the Fed could announce the start of QT (quantitative tightening) this week. The economic calendar resumes with existing home sales (Monday) forecast to rise 0.4% to a 5.64 mln unit pace in June. Various May home price indices are due (Tuesday), including the Case-Shiller and FHFA readings. Consumer confidence is also on tap (Tuesday), but expected to slip to 117.0 for July from 118.9, while the Richmond Fed index is seen steady at 7. The MBA mortgage market indices are due (Wednesday), along with the EIA energy inventory report and new home sales may decrease 2.5% to a 595k pace in June. Durable goods orders are forecast to snap back 2.7% in June vs -0.8% in May (Thursday). Advance Q2 GDP should be boosted to 2.6% from 1.4% in Q1 (Friday), given upside risk on consumption, while Q2 ECI is forecast to rise 0.5% from 0.8% and final Michigan sentiment may be revised up to 93.5 from 93.1 previously. Fedspeak continues to run silent into the FOMC decision midweek before Minneapolis Fed’s dovish dissenter Kashkari breaks the ice with a moderated Q&A Chamber of Commerce event from 13:20 ET (Friday)

Canada: In Canada GDP for May (Friday) is the centerpiece of this week’s calendar. An 0.2% m/m gain is projected for May, which would match the 0.2% increase revealed in April. An as-expected improvement in May GDP would leave real GDP growth on track for a roughly 3% gain following the 3.7% surge in Q1, which would match the BoC estimate for Q2 GDP and hence be supportive of the already widespread projection for a near tear rate hike. Wholesale trade (Monday) is seen improving 0.7% after the 1.0% gain in April. The report typically has little lasting impact on the market, but will be the final input into the May GDP projection. May average weekly earnings and the CFIB’s Business Barometer index of small and medium sized business sentiment are both due on Thursday.

Europe: The ECB went into the summer break with a parting shot that once again acknowledged stronger growth while stressing that substantial monetary accommodation remains necessary and that inflation is not where the ECB wants to it see yet. This week brings the first key GDP readings for Q2 and French growth seen steady, while Spanish growth is expected to come in unchanged at 0.8% q/q. A robust second quarter would tie-in with improved confidence indicators, although looking ahead, it may feel as though that is as good as it gets for now, with July confidence indicators expected to fall back slightly. A decline in the manufacturing PMI to 57.2 expected and a marginally better service reading of 55.4 which would leave the July composite PMI unchanged at 56.2. Risks are to the downside though, considering the second consecutive dip in German ZEW investor confidence and as the euphoria over Macron’s election victory fades and political risks ease. July Eurozone Economic Confidence is expected to have eased to 110.9 from 111.1 in June.

Inflation, meanwhile, remains far below the ECB’s definition of price stability and July preliminary HICP readings from Germany, France and Spain are likely to indicate that this won’t change soon. Growth forecasts may have been revised up, but inflation forecasts are being scaled back with the latest surge in the EUR doing nothing to change the picture that a strong currency and weaker than projected oil prices will keep headline inflation subdued.

UK: The calendar this week features the first release of Q2 GDP (Wednesday), which it is expected to rise 0.3% q/q and by 1.7% y/y, which would follow respective Q1 figures of 0.2% and 2.0%. The quarterly pace of growth likely remained relatively lackluster in Q1 compared to growth in the Eurozone and the U.S., and the same picture looks likely to be painted again this quarter. Weakness in sterling following the Brexit vote last June has fed a secular rise in UK inflation, which in turn has eroded household incomes and consumer spending, which in recent years of government austerity has been the main driver of the economy. Other data releases include the CBI’s July surveys, with the industrial trends report (Tuesday) seen ebbing to 11 in the headline total orders reading after 16 in the prior month, while the distributive trades report (Thursday) is expected to fall to a reading of 10 in the headline realized sales figure after 12 in June.

Japan: Japan’s docket gets under way on Wednesday, with June services PPI due. Prices expected at 0.5% y/y versus the previous 0.7% outcome. The remainder of the calendar comes on Friday, starting with CPI data. June national prices are seen slowing to 0.3% y/y from 0.4% overall, and up 0.3% y/y from 0.4% on a core basis. June unemployment is seen falling a tenth to 3.0%, while the job offers/seekers ratio is expected at 1.50 from 1.49. June personal income and PCE are due, with the latter forecast to have risen 0.5% y/y from -0.1% previously. June retail sales are penciled in at a 0.5% y/y rate from -0.6% for larger retailers, and up 3.0% y/y from 2.1% overall

Australia: In Australia, the Q2 CPI (Wednesday) takes center stage given the global focus on inflation. The latter was discussed at the July 4 policy meeting. Trade prices (Thursday) are seen rising 1.0% in Q2 (q/q, sa) for imports and falling 6.0% for exports. The Q2 PPI is due Friday. Reserve Bank of Australia Governor Lowe speaks on the Labor Market and Monetary Policy (Wednesday) form Sydney.

New Zealand: New Zealand’s calendar has June trade (Wednesday), expected to reveal a NZ$150 mln surplus following the NZ$103 mln surplus in May.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets mostly moved sideways, fluctuating between gains and losses ahead of the Fed meeting. Asia’s equity benchmark remains near the highest level since 2007, and the ASX managed a nearly 0.9% gain so far, despite a stronger AUD as oil prices moved higher. The Fed is likely to remain on hold this week and could push out further action on rates, but markets are still cautious, with U.S. stock futures also moving sideways, although the FTSE 100 future is managing gains, as the pound retreats. The EUR meanwhile is on the rise again and Mersch’s comments on reflation and his more optimistic view on inflation and growth could also see fresh pressure on Bund futures. The 10-year cash yield already moved up from lows in late trade yesterday and closed above 0.50% and indeed, while Draghi may have been eager to calm nerves ahead of the summer, tapering is still on the agenda for next year.

US Data: U.S. Markit manufacturing PMI jumped 1.2 points to 53.2 in the July preliminary print after falling 0.7 points to 52.0 in June. It was 52.9 a year ago. This is a 14th consecutive month of expansion. Also, the bounce breaks a string of declines going back to the start of the year after the gauge hit 55.0 in January, reflecting increased momentum as the second half of the year begins after the slowing in Q1 and Q2. The index hit a recent low of 50.7 in May 2016. The preliminary July services index was unchanged at 54.2 after rising 0.6 points in June 53.6 in May. It was 51.4 a year ago. It’s a 17th straight month of expansion and has been fairly stable in the 53.5 area all year since hitting a high of 55.6 in January. Employment rose to 54.4 from 52.8 previously and is the highest reading since December. Prices charged fell. The flash composite index rose 0.3 points to 54.2 in July from 53.9 in June and is the highest reading since January. It was 51.8 a year ago. Employment and new orders improved.

SNB’s Jordan: CHF still significantly overvalued. The central bank head said in an interview with Le Temp, conducted last week and published late yesterday that this means the SNB is sticking with its policy of low interest rates and intervention on forex markets if needed. Jordan added that inflation remains low with production capacity not fully exhausted. He stressed that the central bank still has enough room to manoeuvre to expand the balance sheet if necessary. The USDCHF was relatively unmoved and trades at 0.9464 down from overnight highs of 0.9476

FX Update:. Narrow ranges have been the order of the day so far, with a combo of a dearth of fresh directional cues, summertime thinness, and the looming proximity of the Fed’s policy announcement (tomorrow) fostering a noncommittal market. USDJPY dipped back under 111.00, reflective of a broad though moderate bid in the yen, which has been seen since just after the Tokyo fix. Stock markets in Asia have seen little direction. EURUSD has continued to oscillate around the 1.1650 level for a second day, holding below the 23-month high at 1.1684 that was pegged in the Asia session on Monday. AUDUSD continued to consolidate the sharp gains the pair saw last week. Cable has remained buoyant above 1.3000, though off yesterday’s four-session peak at 1.3058.

Main Macro Events Today

German Ifo Business Climate – After yesterday’s disappointing July PMI readings, the German Ifo index tomorrow also comes with a risk to the downside. We had been looking for a drop to 114.9 (med same) from 115.1 in the previous month, but the risk is that the headline number comes in even weaker. Like the PMIs, the Ifo reading is likely to remain at high levels, indicating a robust start to Q3, but after what looked like another strong quarterly growth rate in Q2 it seems with regard to survey indicators this may have been as good as it gets. That doesn’t mean the recovery is abandoned or at risk, but the euphoria that seem to hit sentiment in the wake of the Macron victory is giving way to a more sober assessment. The good news though is that the PMIs point to ongoing improvements on labour markets, so companies continue to invest into the recovery and while the data will back Draghi’s reluctance to commit to QE just yet, it is clear that monthly asset purchases will be scaled back with the new program that will start next year.

US Consumer Confidence – June Consumer Confidence is expected to fall to 117.0 from 118.9, this compares to a low of 25.3 in February of 2009. Forecast risk: downward, given the decrease in the Michigan headline and Market risk: downward, as weaker data could impact rate hike timelines. Confidence continues to benefit from reduced gasoline prices and is now experiencing a post-election lift.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Positive leads from the U.S., including corporate earnings, and broad-based gains in commodities helped the global stock move higher to continue in Asia overnight at least in the first part of the session. The CSI 300 is in the red, however, and the Hang Seng underperforming with a meagre 0.17% gain, and Japanese markets are down from early highs while FTSE 100 and U.S. stock futures are in the red. So, some caution is settling in again ahead of the Fed announcement today with some speculation that the Fed could announce the start of quantitative tightening as early as today. In Europe, the ECB is still far away from reducing its balance sheet, and while QE tapering is on the cards for 2018, Nowotny yesterday argued against committing to an end to asset purchases. Today’s calendar focuses on the first reading of Q2 GDP from the U.K, while all eyes will be on the Fed’s post FOMC meeting announcement and guidance. The big question is whether the central bank will detail plans to unwind QE, though we think not as inflation data has been benign and there hasn’t been any rhetorical prepping by members for such a policy shift since the issue was brought up at the June policy meeting.

Australia: Earlier today, the Aussie dollar took a rap following sub-forecast CPI data out of Australia, which came in at 1.9% y/y in Q2 versus the median forecast for 2.2% y/y, while the underlying rate remained stubbornly below the RBA’s target range. AUDUSD is just off its lows, at 0.7884 bid presently, showing a 0.7% decline on the day as the London interbank market take to their seats. The Aussie is showing a similar magnitude of decline versus the yen and euro, too.

U.S. reports: revealed upside July surprises for both consumer confidence and the Richmond Fed, alongside a firm but largely seasonal 0.8% May rise for the S&P Case Shiller. For consumer confidence, we say a July pop to 121.1 from 117.3 (was 118.9) that left this measure at its strongest level since the 16-year high of 124.9 in March, with a rise in the current conditions index to a 147.8 new cycle-high, despite drops in other July confidence measures. For Richmond Fed, we saw a rise to 14.0, after revisions that lifted recent levels to 11.0 (was 7.0) in June and 3.0 (was 1.0) in May, versus a 7-year high of 19.0 (was 17.0) in February. This increase bucked declines in other producer sentiment measures, though the ISM-adjusted average of the major surveys should still tick down to 55 in July from 56 in June, 55 in May, 56 in April, and a 57 cycle-high in February and March. Nevertheless, yesterday U.S. Senate voted to move ahead on repealing Obamacare. Initially fifty GOP senators voted yes, with two voting no, for a total of 50, while not a Democrat voted for the measure. Hence Vice president Mike Pence as Reuters reported, forced to cast the tie-breaking vote. The EURUSD had retreated from 1.1712 highs, after failing to take out the August 2015 high of 1.1714. Profit taking out of London had reportedly been in play, with the pairing dipping to 1.1657 lows.

ECB’s Nowotny against committing to end date for QE: Nowotny said in an interview yesterday that he considers it “wise to step of the gas slowly”, adding that “the U.S. central bank also implemented tapering without committing to a definite timetable”. The QE program currently runs until the end of the year and the ECB iw widely expected to reduce monthly purchase targets again with a follow up program, but Nowotny’s comments suggest that the ECB may not yet lay out a full-time table for a final end to QE and indeed given Draghi’s very cautious stance so far, it seems more likely that the ECB won’t commit to a fixed data for the end of QE. The IMf also urged the ECB to maintain stimulus as underlying inflation and wage growth remains weak and with inflation expected to ease again next year, Draghi seems to have room for a gradual approach.

German Jul Ifo index unexpectedly jumped to 116.0 from 115.2. Expectations had been for a slight correction in the headline reading, especially after Monday’s disappointing PMI readings. The breakdown showed that the overall improvement was entirely due to a sharp rise in the current conditions indicator, while the more forward-looking expectations index stagnated. So the message is not unlike that of the PMIs, which showed ongoing robust growth, but a slowdown in the pace of expansion. A strong German Ifo figure, upbeat ECBspeak and the release of the BoJ minutes from the mid-June meeting all failed to stir markets, with participants looking to tomorrow’s policy announcement and communication from the Fed as the next key risk event. The yen has been following its often-seen inverse correlation with global stock markets, which have been mostly buoyant this week, underpinned by incoming corporate earnings and guidance, yesterday’s record print in the latest German Ifo indicator, and expectations for the Fed to affirm its slow-go approach to tightening following the conclusion of the FOMC meeting today. The minutes from the BoJ’s mid-June policy meeting, released yesterday, meanwhile showed that members discussed the idea of QE tempering, but were still worried about the persistence of well below target inflation.

Main Macro Events Today

FOMC – FOMC began day 1 of its 2day meeting. No major changes are expected in Wednesday’s announcement (14 ET). The Fed is widely expected to leave its 1.00% to 1.25% rate band in place due to the slowing in inflation. Committee members have also indicated they want more evidence of a pick-up in growth after the disappointing 1.4% Q1 pace, though recent data should be fulfilling that need.

US Home sales, MBA & EIA – The MBA mortgage market indices are due today, along with the EIA energy inventory report and new home sales may decrease 2.5% to a 595k pace in June, down from 610k in May.

UK GDP – The calendar features the first release of Q2 GDP, which expected to rise 0.3% q/q and by 1.7% y/y, which would follow respective Q1 figures of 0.2% and 2.0%. The quarterly pace of growth likely remained relatively lackluster in Q1 compared to growth in the Eurozone and the U.S., and the same picture looks likely to be painted again this quarter. Weakness in sterling following the Brexit vote last June has fed a secular rise in UK inflation, which in turn has eroded household incomes and consumer spending, which in recent years of government austerity has been the main driver of the economy.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: The Fed’s reluctance to commit to a time for QT beyond “relatively soon” and the fact that the Fed appeared to be moderately more concerned that the decline in inflation pressures could be a little more durable than previously thought has given bond as well as stock markets a fresh boost. Equities moved mostly higher in Asia overnight (China’s CSI 300) once again a notable exception, with commodities still underpinned as oil prices hold clearly above USD 48 per barrel. Bund futures already jumped higher in after hour trade yesterday and European stock futures are rising in tandem with U.S. futures, pointing to broad gains on European markets at the start. ECB’s Nowotny may have repeated his support for reduced asset purchases again, but that the ECB will start to taper next year is pretty much expected and Nowotny yesterday urged caution when the ECB starts to “take the foot of the gas”. Today’s calendar has Eurozone M3 and the U.K. CBI distributive trade survey.

German GfK consumer confidence surges to record high of 10.8 from 10.6 in the previous month. The unexpected jump higher ties in with record Ifo readings and confirms that the German recovery remains firmly on track. More arguments for the ECB to take the “foot off the gas” and reduce monthly asset purchases. The full GfK breakdown, which is only available until July showed also falling price expectations though, alongside improved economic confidence and the willingness to buy dipped despite a sharp drop in the willingness to save. Hence, some mixed signals and somethings for the doves, who continue to fret about low inflation and wage growth.

FOMC: held rates steady and gave no firm date on the balance sheet unwind. However, the policy statement did indicate the run-off will begin “relatively soon,” versus this year in the June statement, though it basically reiterated comments from Fed Chair Yellen in her recent testimony. The decision was unanimous. The Fed said the economy has been rising moderately while job gains have been “solid.” On inflation, the Fed said overall and core prices have “declined and are running below 2 percent; survey-based measures of longer-term inflation expectations are little changed, on balance.” Inflation developments will continue to be monitored “closely.” One important change versus the June statement was the elimination of word “recently,” referring to the decline in inflation, suggesting there’s some concern the weakening will be more long lasting.

U.S. reports: revealed rise in MBA mortgage market index at 0.4%, alongside a 2.2% drop in the purchase index and a 3.4% rise in the refinancing index for the week ended July 21. The average 30-year fixed mortgage rate sank 5 basis points to 4.17% after yields drifted lower last week with Europe. Also, U.S. new home sales edged up 0.8% to 0.610 mln in June. That follows the 4.9% rebound to 0.605 mln in May after the 9.6% April drop to 0.577, for a net -27k revision. New home sales hit a cycle high of 0.638 mln in March amid mild winter weather and hopes for Trump stimulus. The months’ supply of homes moved up to 5.4 from 5.3. The median sales price declined 4.2% to $310,800 following the 4.8% rise to $324,300 in May. Prices are down 3.4% y/y in June versus a 9.6% y/y gain previously.

Main Macro Events Today

US Durable goods, Jobless claims – Durable goods orders are forecast to snap back 3.0% in June vs -0.8% in May, while the advanced trade gap may narrow to-$65 bln from -$66.3 bln and initial jobless claims are set to rebound 8k to 241k for the week ended July-22.

UK CBI distributive trade & Gfk – The distributive trades report is expected to fall to a reading of 10% in the headline realized sales figure after 12% in June.The GfK Group Consumer Confidence index is expected to fall to a reading of -11 after -10 in June.

Japanese Data – The calendar features the CPI data. June national prices are seen unchanged at 0.4% overall, and same for a core basis. June unemployment is seen falling a tenth to 3.0%, while the job offers/seekers ratio is expected at 1.50 from 1.49. June personal income and PCE are due, with the latter forecast to have risen 0.6% y/y from -0.1% previously. Lastly, June retail sales are penciled in at a 0.1% y/y rate from -0.6% for larger retailers, and up 2.3% y/y from 2.1% overall..

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Risk appetite turned negative during the Asian session, with equity markets, including U.S. index futures, turning lower from record highs. This backdrop will likely put pressure on EGB yields from the open. The European calendar today features a flood of data releases, highlighted by advance Q2 GDP figures out of France and Spain, and preliminary inflation figures for July from various key economies out of the Eurozone, which will be a big focus for markets given the ECB’s course to taper QE. French HICP is expected unchanged at 0.8% y/y, and German HICP is seen at holding at 1.5% y/y, which would also be unchanged from the previous month. Data in line with our expectations would not likely elicit much market reaction. The Eurozone also has the latest business climate survey for July, where the headline is expected at 100.9, down from 111.1 in the previous month.

FX Update: The Swiss franc tumbled for a four-straight session, driving EURCHF to a 1.1363 high, a level not seen since the SNB abandoned its former 1.2000 floor in January 2015. USDCHF, meanwhile, rallied to a one-month peak, at 0.9721. The price action affirms the sentiment sea-change that’s been afoot this week, underpinned by a combo of a more confident euro outlook coupled with a -0.75% deposit rate in Switzerland. Elsewhere, EUR-USD has been playing a narrow range in the upper 1.16s, roughly a big figure below the 30-month high that was seen yesterday at 1.1776. USDJPY settled back near 111.00, a level that has seemingly been exerting gravitation pull over the last week or so, with attempted rebounds failing to sustain during the week. The six-week low seen on Monday at 1110.62 remains in the frame. A tumble in equity markets, with Asian bourses and U.S. equity index futures down today, provided the yen some support. A flood of data out of Japan were mostly encouraging, though CPI remained low, with the BoJ-monitored core figure coming in at just 0.4% y/y, unchanged from May and meeting the median forecast.

U.S. reports: revealed upside surprises for the durable goods and advance indicators reports for trade and inventories that boosted Q2 GDP estimates to 3.0% from 2.6%, though another lofty initial claims reading suggests that auto retooling is unlikely to boost this year’s July data. For durables, we saw a 6.5% June orders pop thanks to a 19.0% Boeing-led transportation orders surge, though we saw a 0.2% ex-transportation rise that tracked estimates. The report was robust thanks to strong equipment data. For the advance indicators, we saw an export-led $1.0 bln upside June trade surprise and big 0.6% June gains for both wholesale and retail inventories. Initial claims rose 10k to 244k in the fourth week of July, leaving what is now a 242k July average, following similar prior averages of 243k in June, 241k in May, and 243k in April. The July nonfarm payroll forecast remains at approximately 190k.

Main Macro Events Today

U.S. GDP & ECI – The first release on Q2 GDP is out today and should reveal a 2.6% headline for the quarter following a 1.4% pace in Q1. Consumption looks poised for stronger growth during the quarter and expected a 1.2%, up from 2.4% in Q1. Q2 employment cost data expected at 0.6% headline that follows a 0.8% clip in Q1. This would have the y/y pace of growth at 2.3%, down from 2.4% in Q1. Wages and salaries as well as benefit costs are both expected to expand at a 0.5% clip for the quarter from 0.8% and 0.7% respectively in Q1.

Prel. German Inflation – Eurozone inflation remains far below the ECB’s definition of price stability and July preliminary HICP readings from Germany, France and Spain are likely to indicate that this won’t change soon. We see headline readings unchanged from June at 1.5% y/y in Germany, 0.8% y/y in France and 1.6% y/y in Spain, which would point to a steady Eurozone reading (due next week) of 1.3% in July.

Canada GDP – GDP is expected to improve 0.2% m/m in May after the 0.2% improvement in April. An 1.1% rise in May retail sales volumes followed a 1.1% rise in manufacturing volumes. There was a 0.8% gain in wholesale shipment volumes during May. But housing starts tumbled to 195.0k in May from 214.8k in April, suggestive of a negative contribution from construction. The outlook for mining, oil and gas production is negative. Energy export values fell 9.0% m/m in May after growing 3.9% m/m in in April.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

A lot has been digested in recent weeks, including monetary policy decisions, a plethora of earnings reports, data, and supply, with geopolitics thrown in for good measure. Stocks have generally focused on the positives of continued central bank largess, generally bullish earnings news, and signs of improved economic activity, and they’ve left core indexes at or near record highs. There were no surprises from the recent FOMC and ECB policy decisions. Rates were left unchanged with QE kept intact, for now. Of the three central bank meetings this week, with the BoE, RBA, and RBI, steady to easier policy is expected. That should continue to underpin bonds and stocks near term.

United States: This will be another busy week in the U.S. as August begins. Earnings will remain a factor ahead after strength the Blue Chips boosted the Dow to yet another record peak, though surprising weakness in tech shares and disappointing reports from FANG (Facebook, Amazon, Netflix and Google) shares rattled the NASDAQ. For the month-to-date, however, core Wall Street indexes are between 2% and 3.8% higher. As for data, another employment report is at hand and it will be closely monitored since it will help determine the start time for quantitative tightening, QT. Strong numbers will increase the risk that QT is announced at the next FOMC meeting on September 20, 21. July nonfarm payrolls (Friday) are expected to show a 182k following the better than expected 222k June gain, with the unemployment rate dipping again to 4.3% from 4.4%. Average hourly earnings are seen rising 0.3% (median 0.3%) versus the prior 0.2%. The workweek is expected to dip back to 34.4 (median 34.5) from 34.5. The as-expected acceleration in Q2 GDP to a 2.6% growth clip supports forecasts of decent job gains. Earnings will be a focus as the inflation aspect is important for the Fed view. Other major reports this week include the July manufacturing ISM (Tuesday), estimated dipping to 55.5 (median 56.4) after jumping a surprising 2.9 points to 57.8 in June, which was the highest since the August 2014. The nonmanufacturing ISM (Thursday) is also expected to slide to 56.8 in July after rising 0.5 points to 57.4 last month. June personal income and consumption (Tuesday) will help fine tune the GDP outlook. We’re forecasting a 0.4% income gain (median 0.4%), with spending up 0.1% (median 0.1%). July vehicle sales will provide more clues on spending. Domestic car sales (Tuesday) are seen at a 4.5 mln pace (median 4.5 mln), with trucks at 8.5 mln (median 8.6 mln).

Canada: releases are due this week with the July employment and June trade numbers reported (Friday). We expect employment to rise 25.0k in July after the 45.3k gain in June. The unemployment rate is projected at 6.5% in July, matching June. A widening in the trade deficit to -C$1.3 bln in June from -C$1.1 bln in May is projected. A 0.5% m/m gain in exports is seen following the 1.3% rise in May, as the tumble in crude oil prices weighs on the value of Canada’s total exports. The IPPI (Monday) is projected to fall 0.6 m/m in July after the 0.2% decline in May, as weaker energy and commodity prices and a sharp firming in the value of the loonie relative to the greenback drive the index lower. The Markit manufacturing PMI for July is due Tuesday. The seasonally adjusted Ivey PMI for July (Friday) is expected to improve to 63.0 from 61.6 in June.

Europe: This week’s round of data releases are likely to confirm the picture of robust growth, but still low inflation. Data have confirmed that the Eurozone recovery remained relatively robust in the second quarter and we expect official Q2 Eurozone GDP numbers (Tuesday) to show a quarterly growth rate of 0.6% q/q (median 0.6%), unchanged from Q1. Though these are backward looking numbers, the upcoming round of July confidence indicators (to be completed with the final PMI readings) suggest that momentum remained strong at the start of Q3. We expect the final manufacturing PMI (Tuesday) to be confirmed at the preliminary 56.8 (median 56. and the services reading (Thursday) at 55.4, leaving both sectors firmly in expansion mode. Confidence data aside, German manufacturing orders growth (Friday) has remained robust and we are looking for another solid June number, even if the quarterly rate is likely to have fallen back to 0.3% m/m (median 0.5%) from 1.0% m/m in May. Against that background, we expect the German seasonally adjusted jobless total (Tuesday) for July to have dropped a further -2K (median -6K), which would leave the sa jobless number unchanged at a very low 5.7%. The overall Eurozone unemployment rate for June meanwhile (Monday) is seen falling to 9.2% (median 9.2%) from 9.3% in May.

UK: The BoE’s Monetary Policy Committee meets this week (announcing Thursday), and the central bank will also release its quarterly Inflation Report with revised growth and inflation projections. Three of the then eight members voted for a 25bp hike in the repo rate at the last meeting in June (there are normally nine members, but one position was then temporarily vacant), and we expect a 6-3 vote spilt this time around in favor to leave interest rates unchanged (the same as the median expectation). With June CPI having undershot expectations, at 2.6% y/y after 2.9% y/y in May, and with concerns about the health of the key consumer sector, more dovish arguments will likely continue to prevail. There is risk of a downward nudge in growth forecasts in the Inflation Report, too, while inflation projections are likely to remain near unchanged. The data calendar this week is highlighted by the Markit PMI surveys for July. The manufacturing PMI (Tuesday) is expected to hold at a near steady 54.4 reading after 54.3 in June. The construction PMI (Wednesday) is seen at 54.3 after 548 in the prior month, and the services PMI is anticipated to lift fractionally to a 53.6 reading after 53.4 in June. In-line data would affirm that activity in all three sectors covered by the surveys is continuing to expand, albeit at a relatively less robust pace relative to the last year or two.

China: July CFLP manufacturing PMI (Monday) is expected to slip to 51.5 from 51.7, while the Caixin/Markit series (Tuesday) is forecast at 50.2 from 50.4. The July services PMI (Thursday) is estimated rising to 51.8 from 51.6. The markets remain optimistic on China’s growth outlook.

Japan: Industrial production report (Monday), which we expect will come in at a 5.0% y/y pace, slowing from the 6.5% in May. June housing starts (Monday) are penciled in at -0.3% y/y, unchanged from May. June construction orders are also due Monday. July manufacturing PMI (Tuesday) should improve to 52.5 from 52.4. July auto sales are also on tap Tuesday. July consumer confidence (Wednesday) is expected to dip to 43.2 from 43.3 in June. July services PMI is due Thursday.

Australia: The Reserve Bank of Australia meeting is center stage (Tuesday). We expect no change to the current 1.50% policy setting. The RBA also releases the Statement on Monetary Policy (Friday). Economic data is relatively abundant this week. Building approvals (Wednesday) are seen rising 3.0% in June after the 5.6% drop in May. The trade surplus (Thursday) is seen narrowing to A$2.0 bln in June from the A$2.5 bln surplus in May. Retail sales (Friday) are projected to edge 0.1% higher in June after the 0.6% m/m rise in May.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets moved higher, with a rally in banks underpinned by earnings reports and helping to offset pressure on exporters and automakers. The ASX outperformed after the RBA left rates on hold and warned the strong currency will impact growth and inflation.100 and U.S. stock futures are also moving higher. The FTSE already managed to rescue slight gains into the close yesterday, while Eurozone markets mostly ended in the red. With the EUR above 1.18 against the dollar and political pressure on German carmakers mounting, the DAX is likely to continue to struggle. Bund yields ended little changed yesterday, while Gilt yields climbed ahead of tomorrow’s BoE announcement and positive sentiment on stock markets should keep core yields underpinned. Eurozone spreads narrowed as peripheral markets outperformed, so at least so far Draghi is managing to keep tapering nerves under control. Today’s local calendar has final Eurozone manufacturing PMI readings for July which are not expected to bring any revisions and German Jul jobless numbers. Preliminary Eurozone Q2 GDP is seen steady at 0.6% q/q and the calendar also has the U.K. manufacturing PMI for July.

FX Action: USDJPY has eased to new trend lows after reports that newly minted White House communications director Scaramucci is out of a job after just 10-days. The pairing fell under 110.00, before recovering to 110.20. The EURUSD continues to edge higher to north of 1.1830. Initial market take is the U.S. administration is off the rails, though the W.H. staff move may ultimately be a positive, perhaps indicating that new Chief of Staff Kelly is in charge.

US Data Yesterday: U.S. Chicago PMI dropped 6.8 points to 58.9 in July, more than giving back the surprising 6.3 point jump to 65.7 in June. The latter was the highest since the 66.1 from May 2014. The 2017 low is 50.3 from January. The index was at 51.8 in October. The 3-month moving average edge up to 61.3 from 61.1. U.S. pending home sales index bounced 1.5% to 110.2 in June, better than expected, after tumbling 0.7% to from 108.6 in May (revised from 108.5). The high for the year was hit in February at 112.3 with the low at 106.4 from January (with the cycle high at 113.6 on April 2016 and a low of 76.4 from June 2010). The index is still well off the all-time peak of 127.0 from July 2005. Lack of inventory remains a problem. On an annual basis, the index is up 0.7% y/y, the same as in May. U.S. Dallas Fed manufacturing index rose 1.8 points to 16.8 in July after sliding 2.2 points to 15.0 in June. The latter was the weakest since the 12.5 in November. Note that the index was at 0.6 in October and had been basically in negative territory from January 2015 through September 2016. It hit a cycle high of 24.5 in February.

Main Macro Events Today

Eurozone Q2 GDP – The preliminary reading of Q2 GDP is expected to show a quarterly growth rate of 0.6% q/q, unchanged from the previous quarter. Consumption remains supportive for growth as the labour market continues to recover and low inflation is underpinning real disposable income. At the same time investment is starting to pick up as spare capacity shrinks and PMI readings, while starting to level off, suggests still high orders and a backlog of work. So a robust start to the third quarter that underpins the ECB’s cautious move towards exit steps, although remaining risks and modest wage growth mean Draghi is still keeping his options open for now.

U.S. Manufacturing ISM – The July ISM is expected to tick up to 55.5 from 57.8 in June. Forecast risk: upward, given strong component data in early month sentiment. Market risk: downward, as weakening in data could impact rate hike timelines. The ISM has shown a recent high of 60.0 in February ’11 and a low of 33.1 in December of 2008.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets moved mostly higher overnight, after positive leads from Wall Street and Europe, which managed broad gains. The ASX, which outperformed yesterday, dropped against the trend, as oil, iron ore and base metals dropped and commodity stocks came under pressure. Earnings reports from Apple and Honda among others underpinned markets. In Europe the DAX finally managed to outperform amid a buoyant market as economic data in Europe and the U.S. dampened tightening concerns, and FTSE 100 futures are rising further in tandem with U.S. futures, while the Bund futures, which rose in tandem with the DAX yesterday, extended gains in after hour trade. European indices remain below recent highs, leaving room to catch up with the surge in the Dow Jones. Still, central bank concerns as well as geopolitical risks and Trump’s challenges all mean investors reserve a degree of caution. Released overnight, the U.K. BRC shop price index dropped -0.4%. Still to come are Eurozone producer prices, the U.K. Construction PMI and the Swiss manufacturing PMI. The BoE starts its meeting ahead of tomorrow’s announcement.

FX Action: The dollar majors have traded mixed so far today in relatively narrow ranges. One mover of note has been USDCAD, which has lifted to a 12-day high at 1.2586, with the pair in process of constructing its biggest rebound since early May. A drop in oil prices, with the WTI benchmark tumbling today below $49.0, which continued yesterday’s correction from the 10-week highs seen above $50.0, provided a cue to put the squeeze on Canadian dollar long positions. USDJPY rebounded to near 111.00 after briefly foraying below the 110.00 level yesterday, leaving a seven-week low at 109.93. A bullish tone in global equity markets, propelled by encouraging earnings reports from bellwether companies, has weighed on the yen. EURUSD has remained in a fairly tight range below the 30-month high it saw on Monday at 1.1846, and has seen good demand on dips under 1.1800. AUDUSD edged out a two-session low at 0.7941, weighed on by a drop in commodity prices.

US Data Yesterday: revealed a weak trajectory for personal income into mid-year following big downward revisions already revealed in last week’s GDP report, leaving a remarkably steep decline in the savings rate to just 3.8% in June. We also saw a big 1.3% June construction spending plunge led by a 5.4% public construction decline after big downward revisions. The mix lowered our GDP estimates to 2.4% from 2.6% in Q2, and to 3.3% from 3.5% in Q3. Consumption mostly tracked estimates, with modest overshoots to the chain price data, and incoming auto data suggest a 2% y/y vehicle sales rise to a 16.7 mln pace. We saw a surprisingly firm 56.3 ISM figure for July, though this marked a decline from a 3-year high of 57.8 in June. The income, retail sales, payroll, and inventory data remain remarkably weak in 2017, though the factory, industrial production, confidence and sentiment data remain strong.

Main Macro Events Today

ADP Numbers – The ADP private payroll number for July today is expected to show an increase of 187,000 from 158,000 last month.

Crude Oil Inventories – The weekly EIA official inventories are expected to show a drawdown of 3.2 million barrels from last week’s significant 7.2 million barrels. However, yesterday the US fuel inventories actually rose unexpectedly, and USOil prices fell over 1% from the psychological $50.00 level.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets pulled back from recent highs, with investors assessing the flood of earnings reports and for now holding back ahead of the next batch. The MSCI Asia Pacific retreated from the highest level since December 2017 and U.S. stock futures are also heading south, although FTSE 100 futures are higher ahead of the BoE announcement. The BoE is widely expected to keep rates on hold even if there are likely to remain a couple of dissenters and the inflation report could bring a slight downward revision to growth projections. Gilt yields still picked up yesterday, and the 10-year gained 2.3 bp while the Bund yield fell back -0.6 bp as Eurozone spreads widened. Some caution then in U.K. markets ahead of the announcement, although at least U.K. stocks seem to be on course to recover yesterday’s losses. The calendar has services PMI readings from the U.K. and the Eurozone as well as the ECB’s economic bulletin.

FX Action: EURUSD has settled lower after hitting a new 31-month high at 1.1910 after the London interbank close yesterday. The pair has since ebbed under 1.1850, opening in London with a softening bias. EURCHF has seen a similar price action, also hitting a 31-month peak yesterday, at 1.1524, before coming off the boil. Ditto for EURJPY, which made a 19-month peak 131.40. The new highs are the culmination of a rally the common currency has been seeing for most of the year, one which has accelerated over the last month or so. The euro had been trading at a discount since the Eurozone financial crisis erupted in 2010, in the face of existential threats and struggling member economies. Reserve and forex fund managers are now viewing the euro has having come through the woods, at least to a significant enough degree. Key currency today remains the GBP with risk of selling pressure following a no-change announcement , and downgrades to growth and inflation. I remain long EURGBP to 0.9000.

Fedspeak: Williams, September might be appropriate for an announcement on the start of the balance sheet unwind, He also said the median dot plot path (1 more hike in 2017 and 3 in 2018) still makes sense. He’s frustrated with the low rates of inflation but said the trend is still positive. The decline in the dollar isn’t a big factor in the inflation outlook. And he suggested the economy might need to slow a bit to keep price pressures in check. The gist of these comments suggests the markets might be too complacent with respect to another tightening this year. Fed funds futures are only showing about a 38% chance for one more hike this year. Rosengren hinted at a September balance sheet announcement, according to statements in a WSJ interview, where he said the markets are appropriately anticipating such. He added that the tight job market justifies rate hike plans as well. There is “reasonable risk” that the unemployment rate falls below 4% over the next two years. Mester supports gradual rate hikes despite weak inflation, reiterating her views on the topic. She views inflation weakness as due to “special factors” (drop in cost of prescription drugs and cell phone services) and not a general downtrend, but it may take a couple months to see an uptick in prices. Mester sees three rate hikes per year as appropriate to avoid overheating and reaching for yield, and anticipates further hikes and bond run-off as the economy grows “somewhat above 2%.” Bullard said he’s concerned over soft inflation, and added he does not support further rate hikes at this point. “I think for now we should remain on pause,” he said, waiting for data evidence of a turnaround in inflation. Further tightening at this point would likely “inhibit” prices from moving up toward the 2% target. Bullard is not a voter this year and this is not a new position for him.

Main Macro Events Today

BoE – Three of the then eight MPC members voted for a 25bp hike in the repo rate at the last meeting in June (there are normally nine members, but one position was then temporarily vacant), and expectations are for 6-3 vote spilt this time around in favour to leave interest rates unchanged. With June CPI having undershot expectations, at 2.6% y/y after 2.9% y/y in May, and with concerns about the health of the key consumer sector, more dovish arguments will likely continue to prevail. There is risk of a downward nudge in growth forecasts in the Inflation Report, too, while inflation projections are likely to remain near unchanged. Carney in the press conference afterwards is always an interesting follow up. The data is at 11.00 GMT with the Governor on 30 minutes later.

Initial Jobless – The weekly Initial jobless claims for the week of July 29 and should post a 238k headline, down from 244k last week but above the 234k headline in the week preceding that. Claims in July are poised to average 243k, steady from June and above the 241k average in May.

U.S. Factory Orders – June factory goods should reveal a 2.7% increase for orders with shipments unchanged and inventories up 0.2% for the month. This follows May figures which had orders down 0.5%, shipments up 0.2% and inventories down 0.1% in that month.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets traded narrowly mixed overnight, with investors eying U.S. politics and jobs data. Hong Kong posted gains, after better than expected profits from Suzuki Motor Corp. While Commonwealth Bank of Australia weighed on the Asian index after accusations of a breach of money laundering laws. Oil prices are slightly down on the day and below the USD 49 per barrel mark. FTSE 100 futures are down, after the BoE induced rally yesterday, while U.S. futures are narrowly mixed. The BoE announcement, which saw a lower number of dissenters and downward revisions to growth and inflation forecasts saw European yields heading south, led by a sharp drop in the Gilt, but the BoE maintained its tightening bias and warned that little more growth may be needed to prompt a rate hike. So not as dovish a message as headlines suggested and there could be a correction along the line. Deputy BOE Governor has reiterated the MPC’s position on the BBC this morning. Cable 1.3140, EURGBP 0.9040 (39 week highs).

German manufacturing orders stronger than expected: Orders rose 1.0% m/m, while May was revised up slightly to 1.1% m/m from 1.0% m/m. The annual rate jumped to 5.2% y/y from 3.9% y/y. Expectations had been for a more muted uptick and the stronger than expected number at Domestic capital goods orders, a gauge for future investment, rebounded strongly from a drop in May and were up 7.5% m/m. Overall domestic orders rose 5.1% m/m, after falling in the previous month, while foreign orders inflow remains volatile on a monthly basis and fell -2.0% m/m, after rising 2.2% m/m. With most of the decline due to a drop in orders from other Eurozone countries, the strong EUR is not to blame, however.

FX Update: The dollar majors have been plying narrow ranges for the most part. EUR-USD held in the upper 1.18s, below the 31-month high logged midweek at 1.1910, and Cable settled in the mid 1.31s, consolidating the sharp losses seen yesterday in the wake of the BoE’s guidance yesterday, which largely kicked expectations for a 25 bp rate hike into 2018. USD-JPY’s downtrend re-asserted, with the pair logging a new six-week low at 109.84 during the Tokyo session, which by our data surpassed the low seen in late New York trade yesterday by 1 pip. Japanese data today included a big miss in June wages data, but, as is often the case, to little impact on the yen. AUD-USD remained buoyant, despite the RBA’s SMP noting that a further exchange rate appreciation would lower both economic growth and inflation, though Australian June retail sales beat expectations, rising 0.3% m/m. Market participants have been hunkered down ahead of today’s U.S. July payrolls release.

Main Macro Events Today

US Employment – July employment data should post a 185k (median 182k) headline following a 222k headline in June and 152k in May. There is still upside risk to the report from the strength in the mining and factory sectors that’s also shown up in firm producer sentiment figures during the first half of the year. The tight ADP number on Wednesday offers caution to the upside risk.

Canadian Employment – It is expected to rise 25k in July after the 45.2k gain in June. Canada employment has been on an uptrend since August of last year as the economy expands. Expectations are for an annual average weekly earnings growth to expand at a 1.3% y/y pace in July, matching the 1.3% growth rates in May and June. While that would again be above the multi-year low 0.7% pace in April, it would still leave a historically tame pace for compensation growth. The unemployment rate is expected at 6.5% in July, matching June.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

The July U.S. employment report provided some solace for the Fed on the growth front, but no major smoking gun on inflation. Headline payrolls growth came in a hair above expectations, with small net tweaks on back revisions. Hours worked were steady but were up from May, though average hourly earnings came in a little hot. The jobless rate ticked down once again and gave the Fed some more surety in nominal terms that it is getting closer to full employment even as the participation rate ticked up.

United States: Consumer credit is forecast to increase $17.0 bln in June (Monday) amid upside risk. NFIB small business optimism and JOLTS job openings (Tuesday) will be mulled. MBA mortgage market data is due (Wednesday), along with Q2 productivity (preliminary) seen rising 0.5% right in line with unit labor costs and wholesale trade seen rising 0.5% alongside a 0.6% gain in inventories. Initial jobless claims are forecast to dip 2k to 238k (Thursday) for the week ended August 5, while July PPI may rise 0.1% or 0.2% ex-food and energy. The Treasury budget gap is set to narrow to -$65.0 bln in July from -$90.2 bln, which was a big blowout in June. The week will round out with the July CPI event, seen rising 0.2% headline and 0.1% core for a tame 1.7% y/y core reading.

Fedspeak returns with a flurry of activity this week starting (Monday) with Bullard and dissenter Kashkari. Dudley will open and take part in a panel discussion on New York economic trends (Thursday). Kaplan will take part in a Q&A session (Friday) and Kashkari will be back to do the same at a community bankers conference.

The earnings season is dying down, though there are still several heavy-weights ahead. Generally solid reports have helped the Dow climb over the 22,000 level, and to eight straight record closes.

Canada: The holiday truncated week is heavy on housing data. July housing starts (Tuesday) are expected to fall to 200.0k from the 213.2k annual pace in June. A 5.0% m/m drop in the value of building permits during June (Wednesday) is seen following the 8.9% gain in May. The new house price index (Thursday) is projected to rise 0.4% m/m in June after the 0.7% bounce in May. There is nothing scheduled from the Bank of Canada this week. Our projection remains for a follow-up 25 basis point rate hike in October, taking rates to 1.00% from the current 0.75% setting.

Europe: The ECB is effectively on holiday and data releases this week will be mostly backward looking, so it should be a relatively quiet week for markets. Draghi has remained very cagey even about the timing of the next QE announcement and this week’s data releases are unlikely to change the outlook and there are no key speeches on the immediate agenda.

German June industrial production (Monday) is expected rising 0.8% m/m (median 0.4%), after the strong orders number and the very strong Ifo reading. We are looking for a pretty stable June trade surplus (Tuesday) of EUR 20.0bln leaving Q2 GDP on course to remain steady around 0.6% q/q. Industrial production data also comes from France (Thursday) and Italy (Wednesday), although unlike Germany both countries have already released preliminary Q2 GDP numbers, so unless there are major surprises it shouldn’t impact the overall picture. Final July HICP rates from Germany, France, Spain and Italy (all Friday) are expected to confirm preliminary data, which should leave national HICP rates ranging from 1.7% y/y in Spain, over 1.5% in Germany to just 0.8% y/y in France and the final Eurozone rate (due the following week) at 1.3% y/y.

UK: Sterling posted losses against all three of the G3 currencies last week for the first time since the first week of June. The culprit was the BoE stance at its August 2-3 policy meeting, with dissenters on the Monetary Policy Committee in favor of hiking falling to two from three at the prior meeting in June, and with the central bank downwardly nudging both growth and inflation forecasts. The economic calendar this week brings the BRC retail sales report for July (Monday), where we expect the headline same store comparison rising by 0.6% y/y, after a 1.2% gain in June. Warm weather has been underpinning sales, along with strong employment levels, though the squeeze on real wages remains a concern for the retail sector in the months ahead. Production data for June are also up (Thursday), where we forecast a 0.1% m/m contraction but 0.1% y/y expansion. June trade data are also due on Thursday.

China: The calendar picks up on Tuesday with the July trade report, where the surplus is expected to $48.0 bln from $42.8 bln. July price indicators (Wednesday) are seen accelerating slightly. CPI is seen picking up to a 1.6% y/y clip from 1.5%, while PPI is forecast rising to 5.6% y/y from 5.5%, respectively. July loan growth and new yuan loans (Thursday) should show the latter at CNY 1,000.0 bln from 1,540.0 bln previously.

Japan: The June current account surplus (Tuesday) is expected to shrink to JPY 800.0 bln from 1,653.9 bln previously. July bank loan figures are also due Tuesday. June machine orders (Thursday) are seen bouncing 4.0% from the 3.6% decline in May. July PPI (Thursday) is forecast to climb to a 2.5% y/y pace from 2.1%, while the June tertiary index (Thursday) is penciled in edging up 0.2% after the prior 0.1% decline.

Australia: The data docket is thin this week. The only main reports are ANZ job adds (Monday) and housing finance (Wednesday), expected to expand 0.5% m/m in June from May’s 1.0% gain. The RBA are due before parliament on Friday following last weeks downgrade to growth and inflation targets and the comments on the firm AUD are expected to be reiterated.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian equity markets pared some of their recent gains after Chinese export and import data fell short of expectations, and investors ponder the global growth and central bank outlook while taking profits. Mixed earnings reports meanwhile weighed on the TSE and a stronger Yen is adding to pressure. Oil prices are holding above USD 49 per barrel but seem to be trending lower again after briefly rising above USD 50 per barrel at the start of the month. U.S. and U.K. stock futures are also heading south, pointing to a correction in the FTSE 100, which outperformed yesterday, as the DAX underperformed and closed in the red, while other European markets nudged higher. Eurozone spreads also narrowed. Released overnight, U.K. BRC retail sales rose 0.9% y/y on a same store basis, down from 1.2% y/y in May, while Swiss sa unemployment remained steady at 3.2%.

German exports slump in June, but trade surplus improves. In line with the Chinese trade report, German export and import growth disappointed, with exports falling -2.8% m/m and imports -4.5% m/m. The sa trade surplus though improved to EUR 21.2 bln from EUR 20.3 bln, leaving the total for the second quarter at EUR 61.3 bln, up from EUR 59.9 bln in the second quarter of the year. Like yesterday’s production numbers then the data point to a robust Q2 GDP growth rate, with net exports underpinning the German recovery, which orders suggest remains on track in the third quarter, even if automaker’s woes and the strong EUR are seeing investors turning cautious on German stocks.

Fedspeak: Yesterday there was a relatively dovish view from the nonvoting president, Fed’s Bullard, who continues to twist between a hawkish and dovish outlook, largely on the winds of inflation. Fed’s Bullard believes current rates are about appropriate for the near term. But, he’s a bit worried about the still low inflation rate, as recent data have “surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target.”. Of importance, though is his disagreement with the Phillips Curve orthodoxy that suggests low unemployment contributes to higher inflation, saying there is little relationship. He expects the economy to grow at about a 2% rate, but noted the pick-up in global growth. Those factors, including improved European activity and the potential for a more hawkish ECB, have weighed on the dollar. He supports getting going on QT, meanwhile he concurs with the general FOMC sentiment that the balance sheet unwind will be very slow and there shouldn’t be any big market impact. Fed’s Kashkari gave a speech as well yesterday in South Dakota, where he said he hasn’t seen wages growing very quickly in a Q&A session. The economy is doing pretty well, he added while noting the largest U.S. banks are still too-big-to-fail.

U.S. reported: consumer credit at $12.4 bln in June following the $18.3 bln May increase (revised from $28.4 bln). Non-revolving credit increased $8.3 bln, continuing to lead the strength in consumer borrowing, after the $11.4 bln jump in May (revised from $11.0 bln). Revolving credit was up $4.1 bln versus the prior $6.9 bln gain (revised from $7.4 bln). Credit slowed a bit in Q2, rising $42.9 bln (4.5%), after the $447.1 bln (5.0%) Q1 increase.

Main Macro Events Today

U.S. JOLTS & NFIB – JOLTS and the NFIB small business optimism survey today, will be mulled. The JOLTS expected to stay nearly unchanged with just a small drop to 5.660 M from 5.666M in May. The NFIB Business Optimism Index expected to be unchanged as well at 103.6.

CAD Housing starts – July housing starts are expected to fall to 200.0k from the 213.2k annual pace in June.

RBA Assistant Gov. Kent – RBA Assistant Governor Kent is due to speak today at the Bloomberg Address in Sydney.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: European bond markets, which were pretty static during the AM session have livened up a bit in the afternoon and Bund yields recovered losses and moved higher, with futures heading south in tandem with EURUSD. The 10-year yield is up 1.8 bp on the day at 14.57 GMT reached an intraday high of 1.73% after the EUR retreated and fell back below EUR 1.18 against the dollar. Low volumes over the summer also means the ECB is curbing its QE purchases in order to limit market distortions, but quiet trading conditions can also distort moves. German export and import growth disappointed. Like yesterday’s production numbers then the data point to a robust Q2 GDP growth rate, with net exports underpinning the German recovery, which orders suggest remains on track in the third quarter, even if automaker’s woes and the strong EUR are seeing investors turning cautious on German stocks.U.K. retail sales were strong in July, according to the British Retail Consortium (BRC).The BRC expressed some caution, noting a “shrinking pool of discretionary consumer spending power,” highlighting the negative real income trend, which was mentioned as a concern in the BoE’s guidance last week. Elsewhere Swiss unemployment held steady at a seasonally adjusted 3.2% as expected.

FX Update: A risk-off sentiment supported the yen and Swiss franc as safe haven currencies and assets came into demand amid an escalation in threatening rhetoric between North Korea and the U.S, with Trump promising Pyongyang “fire and fury.” North Korea’s development of nuclear warhead carrying ICBM capability is the issue, and the flare up in tensions rattled stock markets across the Asia-Pacific region. USDJPY dove to a seven-week low at 109.74, and EURJPY and other yen crosses also declined sharply The biggest mover among the main currencies was AUDJPY, which dove over 0.7%, with the relatively high beta Aussie buck underperforming amid the risk-off sentiment. Market participants will be monitoring the geopolitical situation closely in the days ahead. Normally tensions stemming from North Korea’s antics tend to simmer down quickly, though the stakes seem to have increased as the rouge nation draws near to developing a credible nuclear weapon threat. Elsewhere in the currency market, EURCHF backtracked by over 0.5%, unwinding some of its recent gains and revealing that the franc still has vestiges of a safe haven currency. EURUSD logged a 12-day low at 1.1725, extending the correction that’s been in play since last week’s solid U.S. jobs report, which has fuelled market expectations for the Fed to conduct a quantitative tightening as soon as next month.

U.S. reports: revealed U.S. JOLTS surged 461k to 6,163k in June, a record high level, after falling 265k in May to 5,702k. The rate climbed to 4.0% from 3.8%. Hirings dropped 103k to 5,356k after rebounding 416k previously, with the rate holding steady at 3.7%. Quitters, a favorite stat of Fed chair Yellen, slid 72k in June following May’s 162k increase. The quit rate dipped to 2.1% from 2.2%. The strength in the headline job openings component is good news, and is consistent with much of the other labor market data. And though the slip in the quit number is a little disappointing, it’s been on a choppy course most of the year. U.S. NFIB small business optimism index rose 1.5 points to 105.2 in July, rebounding from June’s 0.9 point drop to 103.6. This was the highest reading since hitting 105.3 in February. Gains were broad-based with 9 of the 13 indicators improving, 3 declined and 1 was unchanged. The data are a little better than expected, as has been the case for several other July sentiment reading.

Main Macro Events Today

CAD Housing starts – July housing starts are expected to fall to 200.0k unit rate in July from the 212.7k pace in June. The roust 252k pace in March was the best reading since the 2008-09 recession, and the strongest since the 288.6k rate in September of 2007. Building permit values are also due today, with a 5.0% decline projected for June.

US Productivity – The preliminary report on Q2 productivity will be out and should post a 0.7% headline, above the flat pace in Q1 but below the 1.8% headline of 16Q4. Unit labor costs are expected to be up 1.2% from 2.2% in Q1 and -4.6% in Q4.

RBNZ – The Reserve Bank of New Zealand’s is going to meet today, to announce their decision on interest rates, publish Monetary Policy Statement and to comment on the current economic situation. No change to the current 1.75% rate setting, expected through year-end. Governor Wheeler holds his usual press conference after the announcement.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Risk aversion amid tensions between the U.S. and China continued to hang over markets during the Asian session. Still, losses in Japan and Australia were relatively modest, while Hong Kong stocks underperformed and are heading for the biggest lost since last year amid concerns about the tensions between the U.S, and North Korea. U.K. stock futures are actually slightly higher, while U.S. futures remain in the red. Investors remain nervous but Bund futures started to move down from highs during the PM session yesterday and yields are likely to have bottomed for now. Eurozone markets underperformed and spreads widened, which highlights that peripheral yields remain vulnerable to bouts of risk aversion. Overnight, RNBZ left the official cash rate unchanged, while announced that inflation remains subdued. Today’s calendar has production and trade data from the U.K. as well as production data from France and trade data from Italy. Released overnight, the U.K. RICS house price balance fell back to 1% from 7%, further adding to signs that the housing market is slowing down.

U.S. reports: revealed a solid round of June wholesale trade figures after big upward May revisions that lifted prospects for GDP, alongside a slightly stronger than expected 0.9% Q2 productivity rise after revisions that paralleled the annual revisions in the GDP and income reports. Now it is expected a Q2 GDP growth trimming to 2.4% from 2.6%, with a $7 bln boost in wholesale inventories but downward revisions of $3 bln for factory inventories and $9 bln for construction. The Q3 GDP growth still expected at 3.3%, with a $26 bln inventory addition. Yet, even with today’s firm inventory gains, inventories have yet to recover from the big 2015-2016 petro-hit, and wholesale petroleum inventories fell by a hefty 5.2% in June despite a 1.9% sales rise.

Fedspeak: Fed’s Bullard said there’s risk the FOMC could be too aggressive on rates, in comments on Bloomberg radio yesterday. The Fed doesn’t need to be preemptive on rates due to weak inflation trends. Rates can be left on hold for now as data are evaluated. The drop-in inflation has surprised policymakers. The G-7 is in a low growth, low inflation regime. And he’s not too optimistic that price pressure will pick up this year. These aren’t surprising comments from Bullard, who has turned more circumspect on rate hikes, still looks for QT to begin this year, but with a slow, incremental start. Chicago Fed dove Evans on the other hand, sees balance sheet reduction in September as quite a reasonable juncture to start, while a December rate hike is possible, though dependent on inflation. He argues that the Fed “should be very careful” in assessing future hikes, since he wants more evidence that inflation is heading to 2% sooner than later. Evans sees current policy as accommodative, while the economy is doing well and likely to average 2.25-2.50% growth the next few years, which is how long it will take to unwind the balance sheet. He believes there’s reasonable chance inflation could reach 2% in the next few years and he doesn’t see major risks of financial instability, at least certainly not due to Fed policy.

Main Macro Events Today

UK Production – Production data for June are up today, where expected at a 0.1% m/m contraction but 0.1% y/y expansion.

U.S. PPI – July PPI is out today and should post a 0.1% headline with the core up 0.2% for the month. This follows June data which had both the headline and core up 0.1% on the month. After a series of declines through the spring, oil prices climbed in July which could help to lift the headline.

U.S. Initial Jobless Claims – Initial claims data for the week of August 5 should tick down to 239k (median 240k) from 240k last week and 245k in the week before that. Initial claims look poised to settle at a 242k average in July that about matches the 243k average from June.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Markets remain firmly in the grip of risk aversion as as the rhetoric between the U.S. and North Korea intensifies. The flight to safety has the stock market rout continuing in Asia (Japan was closed for a holiday) and European and Asian stock futures are also heading south as financial and energy producers in particular come under pressure. Eurozone peripheral bond markets are also feeling the heat and the Italian 10-year yield climbed back above the 2% mark yesterday as investors seek safety in Bund and Gilts. So far peripheral yields still remain relatively low but in this climate Draghi will be very careful not to rock the boat any further with tapering talk. The data calendar focuses on final July CPI readings from US and Fedspeak for today.

Germany: German production data this week was disappointing and the trade data showed a marked contraction in exports over the month, which together with the mixed German PMI readings has sparked concerns over the health of the German economy. Yet, not all is what it seems at first glance and as Germany is heading for the general election in September, the economic outlook remains very strong. The Jul HICP inflation released in the morning, was confirmed at 1.5% y/y, unchanged from the preliminary number and from June. The national CPI rate meanwhile was confirmed at 1.7% y/y, up from 1.6% y/y in the previous month. Overall the German HICP rate remains above the Eurozone average, as the labour market is looking increasingly tight and the number of vacancies rose to post-unification highs. Still, even the German HICP rate is clearly below the ECB’s upper limit for price stability and the data won’t change the ECB’s cautious stance on tapering as it prepares it heads for yet another QE program when the current schedule ends at the end of the year.

U.S. reports: revealed a soft round of PPI and initial claims figures, hence offsetting yesterday’s firm figures for wholesale trade and productivity. August nonfarm payroll estimate is at 190k, which is just above the 184k average thus far in 2017, and it is still expected at 0.2% July headline gains for CPI and PCE chain prices. For PPI report, 0.1% July headline and core price declines reflected a surprising 0.2% service price drop, after firm gains over the past four months, alongside a slightly weaker than expected 0.1% goods price decline. For claims, a 4k rise to 244k in the first week of August reversed a 5k drop at the end of July, to leave claims entering August near recent monthly averages of 242k in July, 243k in June, 241k in May, and 243k in April.

Fedspeak: Fed’s Dudley wrote yesterday in the text of his press briefing that sluggish productivity is damping wages, despite job gains. Though the post-crisis expansion is the third longest on record, it has been at a relatively weak pace, along with wages. He still expects inflation to rise to the 2% target over the medium term. There weren’t any policy insights, though he’s not dissented from the consensus over his tenure, and we don’t look for him to start now. Annual price measures could be depressed for a while, he said in comments to reporters. And he added that it will take some time for the inflation rate to get to the 2% target, but also said the sluggishness is due to a number of one-offs, which won’t fall out of the y/y calculations for several more months. It’s really important, he added, to distinguish what’s happening sequentially compared to a y/y basis. That sentiment suggests he’d likely want to hold off on further rate hikes for now. There’s little chance for any tightening next month, and the risk for December is slipping too, though balance sheet normalization is expected to be announced at the September 20, 21 FOMC.

Main Macro Events Today

US CPI- Production data for June are up today, where expected at a 0.1% m/m contraction but 0.1% y/y expansion.

Fedspeak – Dallas Fed’s hawkish Kaplan will take part in a Q&A session from 9:40 ET and Kashkari will be back to do the same at a community bankers conference from 11:30 ET.

China – July loan growth and new yuan loans are out today should show the latter at CNY 1,000.0 bln from 1,540.0 bln previously.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

Geopolitical tensions reared up last week and eclipsed key fundamental data points. The escalating war of words between the U.S. and North Korea resulted in a textbook flight to safety into bonds, and also provided an excuse to take profits on equities, especially after the Dow posted nine straight record highs.

United States: Data in recent weeks continued to reflect the surprising dichotomy of stronger economic growth and slower inflation. Those dynamics have frustrated FOMC officials who have become increasing eager to normalize policy. Retail sales for July (Tuesday) will highlight the calendar. Headline sales are projected rebounding 0.4% after dipping 0.2% in June and 0.1% in May, while the ex-auto component should rise 0.3% versus the prior declines of 0.2% and 0.3% in June and May, respectively. The Empire State (Tuesday) and Philly Fed (Thursday) manufacturing indexes are due. The former is expected to rise 1.2 points to 11.0 in August, the latter is expected to slip 0.5 points to 19.0 in August. ( A third consecutive decline). July industrial production (Thursday) is forecast rising 0.4%, the same as in June, lifting capacity utilization to 76.8%. July housing starts (Wednesday) should rise to a 1.220 mln pace after the 8.3% June rise to 1.215 mln. The preliminary reading on August consumer confidence (Friday) should edge up to 93.5 from July’s 93.4. It’s held in the mid- to high 90s since the election. As for July trade prices (Tuesday), import prices should bounce 0.2% after June’s 0.2% decline, while export prices should climb 0.3% following the prior 0.2% drop. Other economic reports this week include The August NAHB homebuilder survey index (Tuesday) and July leading indicators (Thursday).

The FOMC minutes (Wednesday) to the July 25, 26 policy meeting will be of interest, but anti-climactic, given the ongoing divergence in growth and inflation trends, and the upshot in geopolitical risks.

Canada: CPI report is the focus this week as inflation remains a key variable for policymakers. We expect CPI (Friday) to be unchanged in July versus June’s 0.1% dip. Manufacturing shipment values (Thursday) are projected to fall 1.0% in June after the 1.1% gain in May. The hefty price driven 4.3% m/m plunge in June export values drives our manufacturing shipments projection. July existing home sales (Tuesday) and the July Teranet/National Bank HPI (Monday) are also due out.

Europe: Geopolitical risks continue to hang over the markets and have shown that Eurozone peripherals remain vulnerable to bouts of risk aversion. The ECB is still on holiday, but recent events will do little to change Draghi’s reluctance to commit to the further QE schedule just yet. Data releases are unlikely to change the central bank outlook. They include the final reading of Eurozone July HICP inflation (Thursday) as well as the first reading for German Q2 GDP (Tuesday) and the second reading of Q2 GDP for the Eurozone (Wednesday), none of which are expected to bring major surprises.

UK: The UK economy has been and is likely to continue to underperform the Eurozone and other peers. The latest Reuters poll found a strong consensus among 70 analysts for the BoE to leave monetary policy on hold until 2019. The calendar this week brings July inflation data (Tuesday), the labour market report covering June and July (Wednesday) and official retail sales numbers for July (Thursday).

China’s docket today revealed July industrial output, which was seen at 7.7% y/y clip missed and came in at 6.4%. July retail sales also missed at 10.4% (10.9% expected) 11.0%, while July fixed investment ALSO missed (8.3%) forecast was 8.6% y/y. Poor set of data.

Japan: Q2 GDP highlighted and was a big beat earlier expected growth to was 2.6% q/q pace from 1.0% previously, but came in at 4.0%. Revised June industrial production is due Tuesday, while the July trade surplus (Thursday) should narrow to JPY 300.0 bln from JPY 439.9 bln.

Australia: The employment report (Thursday) is expected to reveal a 15.0k gain in July jobs after the 14.0k rise in June. The unemployment rate is seen steady at 5.6% in July. The wage price index (Wednesday) is anticipated to expand 0.5% in Q2 after the identical 0.5% increase in Q1. The Reserve Bank of Australia releases the minutes to the August meeting (Tuesday). Assistant Governor Kent speaks (Monday). Assistant Governor (Economic) Ellis delivers a speech Thursday.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: The stock market recovery continued in Asia overnight, with Japan outperforming after underperforming yesterday, while gains were more muted elsewhere. Still, U.K. and U.S. futures are also moving higher, indicating that abating fears over North Korea are keeping markets underpinned, while earnings optimism are helping financials, even as lower oil prices are hitting energy producers. Following the German GDP data (see below) the European session sees U.K. and Sweden release inflation numbers with the former seen nudging higher to 2.7% y/y (med same) from 2.6% y/y in June.

German Q2 GDP: It rose 0.6% q/q a little under forecast and a tad below consensus, but with Q1 revised up to 0.7% q/q from 0.6%, which leaves a stronger overall trajectory. There is no full breakdown with the preliminary number, but the stats office reported that private as well as government consumption improved markedly and that machinery as well as construction investment also picked up. Net exports meanwhile made a negative contribution as imports rose stronger than exports. All in all pretty much in line with expectations and confirming the robust German recovery, which judging by confidence data and the strong orders inflow in Q2 continues in the third quarter. The ECB has acknowledged the improved growth environment, but remains focused on low inflation and moderate wage growth and the most recent rise in the EUR will only add to the arguments for a very cautious approach to QE tapering.

FX Update: USDJPY extended its rebound for a third session, today making a one-week high at 110.45. EURJPY also rose, logging a one-week peak just above 130.0, and other yen crosses are up. The recovery in risk appetite, as cooler heads prevail in the North Korean situation, has remained the central theme behind broad yen weakening. USDJPY support is at 109.84-45, and resistance is at 110.80-82. EURUSD ebbed to a two-session low at 1.1786, as did Cable, at 1.2954, with the dollar now more than having recouped the losses seen on Friday following tepid CPI data. The dollar also gained ground versus the Canadian and Australian dollars, and most emerging market currencies.

Fedspeak: Dudley said he backs another rate hike this year, assuming the economy evolves as expected, in an AP interview. And he added his outlook is little changed from the start of the year. It’s not unreasonable to expect action on the balance sheet next month. He still forecasts growth around 2%, which will tighten the job market. Inflation should move somewhat higher. He thinks asset prices are consistent with the economy’s performance. So far the Fed has been “very, very gentle” in removing accommodation. President Trump has respective the monetary policy process. And he said Gary Cohn would be a “reasonable candidate” for Fed chair.

Main Macro Events Today

UK CPI – Expectations are for a rise in UK CPI later today back to 2.7% from the surprised dip in July to 2.6%. The June 2.9% reading remains the current peak and fueled speculation of a UK rate hike which has now all but disappeared following the BOE’s suggestion of a lot more caution surrounding tightening following the inflation slip.

US Retails Sales – Expectations are for a 0.4% retail sales bounce in July with a 0.3% rise for the ex-auto figure, following vehicle and price-led declines in May and June. We saw a modest 0.6% vehicle sales rise in July, construction jobs and hours worked rose by 6k and 0.1% respectively, chain store sales posted moderate gains, and gasoline prices stabilized after two months of declines. The various consumer confidence and producer sentiment indexes remained strong on the month, though with modest drop-backs for some measures, and we saw big stock price gains

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Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

European Outlook: Asian stock markets are mixed, after an uninspiring session on Wall Street. The Nikkei is up 0.02%, the ASX gained 0.23% as oil prices moved slightly higher and the Hang Seng is up 0.72% in contrast to a -0.30% drop in the CSI. Earnings reports, geopolitics and currencies remain in focus. Ongoing Sterling weakness is propping up the FTSE 100, and U.S. stock futures are also up. EGB yields meanwhile are rising and Eurozone peripheral yields in particular were pushed up yesterday as Germany’s top court raised doubts over the ECB’s stimulus program. Finance Minister Schaeuble told Handelsblatt, that in his view the ECB’s QE program remains within its mandate, but the uncertainty ahead of the final court decision will hang over markets. Still, yields moved back down from highs during yesterday’s session and things should calm down further after the initial announcement.

FX Update: The dollar majors settled in narrow ranges. USDJPY lost upside steam as global stock market performance turned more mixed following a rebound phase. The pair settled in the mid 110.00s after a three-day rally capped out yesterday at 110.84, an eight-day peak. And right on the 20 day moving average. EURUSD planted itself around 1.17740 after logging a one-week low at 1.1687 yesterday, which was seen following robust retail sales and Empire State index reports out of the U.S. USD-CAD settled below the one-month peak of yesterday, at 1.2778, and Cable rooted itself in the mid 1.28s after logging a one-month low yesterday at 1.2846. A central focal point today will be the release of the FOMC minutes to the June policy meeting. (Details below)

Yesterday’s US Reports: Mostly beat estimates and lifted prospects for GDP in 2017, with solid July retail sales gains after big and broad-based upward revisions, and an August Empire State surge to a 3-year high of 25.2. The June business inventory figures tracked estimates, with a big 0.5% June rise that included a tiny retail inventory undershoot, and a firm round of July trade prices led by gains for food export and oil import prices, with a skewing of price strength toward exports. Q3 and Q4 GDP growth estimates remain around 3.3% and 2.6% respectively.

Fedspeak: Kaplan repeated that the balance sheet unwind should start very soon, but gave no firm date, in a podcast with The American Banker. We’re looking for the FOMC to announce QT at the September 20, 21 meeting. But he also indicated, as he did Friday, that it’s appropriate to be patient on the timing of the next rate hike. Kaplan is a voter, and typically hawkish, so adds some risk to the call for a December rate increase. He believes there is still some slack in the labour market, but the firming jobs market should eventually translate into higher prices.

Main Macro Events Today

FOMC Minutes – The Wall Street Journal wrote yesterday of 5 key elements: 1) Portfolio Pointers – any potential for more ‘definitive signal’ on balance sheet wind down in September sought. 2) Inflation Questions – potential for hot debate on cold inflation stats. 3) Another Rate Increase? – even some centrists have been disappointed by low inflation, could delay next hike. 4) Wither the Dollar? – weak dollar could inform debate on economy, inflation, exports, etc. 5) The Debt Limit, Again – just how much the Fed hits the ‘pause’ button or prepares to take emergency steps in the event of a shutdown could be revealed in the minutes.

Eurozone Q2 – Expectations are for a confirmation of the 0.6% (QoQ) and 2.1% (YoY) first reading.

Always trade with strict risk management. Your capital is the single most important aspect of your trading business.

Please note that times displayed based on local time zone and are from time of writing this report.

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.